Malaysia, Singapore to Hold Leaders’ Retreat, Proposed Special Economic Zone

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Malaysia and Singapore are set to hold the Leaders’ Retreat in the Republic next month to discuss and finalise operational details for a proposed Johor-Singapore Special Economic Zone (SEZ), said the state’s Chief Minister Onn Hafiz Ghazi.

Speaking during the state assembly on Thursday (Sep 14), Mr Onn Hafiz said Malaysia Prime Minister Anwar Ibrahim would be discussing the terms of reference (TOR) of the proposed SEZ with his Singapore counterpart Lee Hsien Loong during their upcoming retreat.

“God-willing in October during the Leaders’ Retreat in Singapore that will be attended by the Prime Ministers of both countries, the issue will be discussed further and followed by an agreement of the TOR,” said Mr Onn Hafiz, in response to a question by Stulang assemblyman Andrew Chen who had asked about the status of the proposed Johor-Singapore SEZ.

Malaysian media have reported that the TOR being finalised would include development tasks and the timeframe for the Johor-Singapore SEZ.

The governments of both countries had agreed to set up a task force to study a possible SEZ following the 16th meeting of the Malaysia-Singapore Joint Ministerial Committee for Iskandar Malaysia (JMCIM) in July.

In a release then, the committee said the JS-SEZ would build on the foundation set by the various work groups to drive sustainable growth, develop human capital, and improve infrastructure and connectivity.

The taskforce is led by Singapore’s Ministry of Trade and Industry and Malaysia’s Ministry of Economy, with the support of relevant government agencies from both countries.

The JMCIM has met regularly since it was set up in 2007 to review cooperation in the South Johor economic zone of Iskandar.

Mr Onn Hafiz said that he was “delighted and excited” with the prospect that the SEZ would come to fruition as it would strengthen ties between Johor and Singapore.

The Machap state assemblyman added that the SEZ would benefit Johor greatly, citing how the state can follow the example of the city of Shenzhen in China which transformed from a poor fisherman’s village to an international metropolis in four decades after it opened a special economic zone in 1980.

He said that the population of Shenzen had grown from 300,000 to 17 million people in that time span, with its gross domestic product (GDP) reaching 2.42 trillion yuan (US$332 billion), even eclipsing that of Hong Kong. 

“In just four decades, Shenzhen has become the third largest city in China. Shenzhen is proof that the Johor-Singapore SEZ can bear fruit for the state of Johor. It requires the support of all parties, especially from the Singapore and Malaysian federal governments,” he said.

Mr Onn Hafiz added that the SEZ’s main objective was to ease the movement of people, services and goods between both countries.

He also said that the electronics, pharmaceutical, automotive, agriculture, and renewable energy industries stood to benefit from the economic zone.

He noted that for the SEZ agenda to be successful, both governments should offer incentives to promote business activity such as special multiple visa entries, green lanes, special tax incentives, exemptions of business licences, good infrastructure and a supply of skilled workers.

Mr Onn Hafiz added that the strategic position of Johor, its international ports, and the availability of land to develop ensured that the state was in a good position to make the SEZ a success.

“While we have all these plans, I however do not want to promise the moon and the stars because it requires the cooperation and agreement of both Malaysia and Singapore,” he said.

CNA has contacted Singapore authorities for clarification on Mr Onn Hafiz’s comments, as well as details on the SEZ, in terms of its areas of focus as well as its geographical scope.

In July, following the 16th meeting of the JMCIM, Singapore’s National Development Minister Desmond Lee told reporters that the idea of a special economic zone would bring “a lot of benefits” to people in Singapore, Malaysia and Johor.

Mr Lee said the task force studying the Johor-Singapore special economic zone would first have to draft its TOR and broad areas of collaboration.

SEZs refer to geographically delimited areas within a country’s borders that offer well-developed industrial spaces with special legal regimes, rules, institutional environments and incentives.

Many Association of Southeast Asian Nations (ASEAN) member states have implemented such zones to attract investments, create jobs and encourage exports.

These zones include export processing zones, free trade zones, technology parks and digital free trade zones.

In July, Mr Anwar announced that the government would be designating the multi-billion-ringgit Forest City project as a special financial zone to spur the economy in Iskandar Malaysia.

Iskandar Malaysia itself is the southern state’s main development corridor that spans four major districts – Johor Bahru, Iskandar Puteri, Pasir Gudang and Kulai.

He outlined that the zone would offer businesses incentives to set up operations, such as a flat income tax rate of 15 per cent for skilled foreign workers compared to 30 per cent elsewhere, multiple entry visas as well as fast track entry for those who are based in Singapore.

Trade and economy policy expert Deborah Elms of the Asian Trade Centre told CNA that there are “literally thousands of SEZs” globally, with a variety of configurations.

But at its heart, the premise of SEZs is to foster growth and support a specific geographic location with jobs by allowing deviations from certain kinds of regulations that might apply outside of these zones, she added.

“As a simple example, most SEZs do not have to pay tariffs on imported products used in manufacturing within the zone. This can make exports which are created inside a zone much more competitive,” said Ms Elms, adding that some provide concessions to spur investment through free or low-cost infrastructure such as power, water and logistics sites.

She also noted that SEZs have had a mixed report card, with some being extremely successful in creating productive ecosystems, good jobs, higher investment, and more exports.

“Others are less successful, especially those which are located in areas with limited links to the broader economy, insufficient labour or insufficient skilled labour,” added Ms Elms. 

Source: CNA